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Banker Survey Continues to Find Slowdown in Farmland Price Growth

An index of banker sentiment continues to show a decline in the pace of growth in farmland prices.The farmland-price index maintained by Dr. Ernie Goss, Creighton University economics professor, as part of the monthly Rural Mainstreet Index (RMI) declined for the ninth time in the past ten months. The September index fell to 54.0 from 55.8 in August, he reports.

"Our farmland-price index has been above growth neutral (50) since February 2010. However, lower farm commodity prices are slowing growth in farmland prices," he notes. "The Federal Reserve's decision to make no changes to their expansionary monetary policy is definitely bullish for agriculture. Most economists, including me, expected the Fed to begin tapering QE3. Thus, the Fed's lack of action in September will be supportive of agriculture commodity prices, farm income and farmland prices in the weeks and months ahead," says Goss.

The growth in the RMI also slowed in September, Goss reports. The index, which ranges between 0 and 100 with 50 representing growth neutral, declined to 52.4 from 55.8 in August. "Lower grain prices this year are slowing the growth in the Rural Mainstreet economy," Goss states. "Additionally 39.4% of bankers this month indicated that lower grain prices have encouraged farmers to store grain and hold for higher prices later. This strategy is likely to payoff for the farmer given the Federal Reserve's decision this week to continue their current stimulus program. This $85 billion per month Fed bond program will be supportive of higher agriculture commodity prices and the farm economy in the months ahead," states Goss.

This month bankers were asked how much farmland cash rents expanded in their area over the last year. On average, bankers reported cash rents grew by 9.9% from this time last year.

Farm equipment sales for September once again declined. The index slumped to 48.3 from 49.2 in August. "Lower agriculture commodity prices are weighing on farmer confidence and their willingness to purchase big ticket items such as agriculture equipment," said Goss.

The Rural Mainstreet Index (RMI) covers 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy, says Goss who, along with Bill McQuillan, president of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.

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